June 30 (Bloomberg) — The outlook for emerging markets is far more optimistic than for developed economies as growth picks up, said investor Marc Faber, who advised investors to buy gold before its eight-year rally.
We are living through major changes in the world, said Faber, the publisher of the Gloom, Boom and Doom report. Emerging markets such as China are becoming more significant to the global economy, and I dont think this will be reversed, he said today at an AsianInvestor magazine forum in Seoul.
The MSCI Emerging Markets Index has jumped 35 percent since the end of March, headed for a record quarter after inflows from investors surged and stimulus plans from China to Brazil bolstered confidence. That compares with a 21 percent increase in the developed-market MSCI World Index.
I agree that emerging markets fundamentals are improving, as some leading indicators show, said Christian Jin, a global- equity fund manager at HI Asset Management Co. in Seoul, which oversees the equivalent of $7.6 billion in assets. The developed nations are still saddled with the problems in their financial sectors and housing markets caused by subprime.
No developed markets rank among this years 10 best performers out of 89 global indexes, according to data compiled by Bloomberg. Peru and China have led gains.
Still, emerging-market stock funds lost $1.87 billion in the week ended June 24, the first week of net outflows since early March, on concern that a rebound in exports will be delayed, EPFR Global said on June 25. Funds in Latin America and Asia excluding Japan showed the biggest outflows, according to the U.S.-based research company.
U.S. Not Particularly Cheap
Among regions, investors should buy shares of Asian nations including Japan on any declines, while U.S. stocks are not particularly cheap in real terms, Faber said.
Global economic growth is unlikely to recover to the levels before the U.S. mortgage-market slump, Faber said.
The World Bank said June 22 the global recession this year will be deeper than it predicted in March and warned that a flight of capital from developing nations will swell the ranks of the poor and the unemployed.
The world economy will contract 2.9 percent, compared with a previous forecast of a 1.7 percent decline, the Washington- based lender said in a report. Growth will be 2 percent next year, down from a 2.3 percent prediction, the bank said.
This unusual condition of all asset prices going up at the same time, or all economies booming, will not be coming back anytime soon, Faber said.
He also recommended investments related to commodities, such as farmland, or the tourism industry.
Faber told investors to abandon U.S. stocks a week before 1987s so-called Black Monday crash. He advised buying gold at the start of its eight-year rally, when it traded for less than $300 an ounce. The metal recently climbed above $940 in Singapore trading.